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Tuesday, June 16, 2009

NY Times on Sotomayor Property Rights Case

Adam Liptak had a story in yesterday's Times on the Didden v. Port Chester case, in which the Second Circuit, by summary order (and with Judge Sotomayor on the panel), affirmed the district court's dismissal of a complaint brought by an aggrieved developer/landowner whose land was condemned as part of a redevelopment project in the Village of Port Chester. The project involved the redevelopment of what the court described as the "blighted waterfront and downtown area" in that town. The town designated a particular developer to carry out the redevelopment plan, using the power of eminent domain to acquire parcels where voluntary agreements with landowners could not be reached.

The plaintiffs in the case alleged (among other things) that the condemnation of their parcel violated the Fifth Amendment's "public use" requirement. The trial court dismissed that challenge on statute of limitations grounds. The Second Circuit affirmed on both the statute of limitations and under Kelo v. New London, the case holding that economic development constitutes an adequate "public use" to justify the taking of property through eminent domain.

At first glance, the facts of the case sound like Kelo redux, except with a developer on the receiving end of the condemnation instead of elderly homeowners. But there is a wrinkle. Language in Kelo left the door open for challenges to condemnations where the stated reason for the condemnation (in this case, economic redevelopment) is not the actual reason for the exercise of eminent domain -- a sort of pretext challenge to condemnations. The plaintiffs in this case alleged that, after Port Chester had authorized the condemnation of land within the redevelopment district but prior to the actual condemnation of their parcel, the designated developer demanded an $800,000 payment from the developer/landowner to walk away from his power to condemn the parcel. The plaintiffs (and a number of conservative commentators) argue that this offer put the condemnation squarely within the Kelo pretext exception. I disagree, for reasons I'll explain below the jump.

Liptak's story is pretty one-sided, and he has come under criticism for it (some of it deserved, I think) by Media Matters. Media Matters takes particular issue with the fact that the only experts Liptak quotes in the story are Ilya Somin and Richard Epstein, both of whom signed onto an amicus brief asking the Supreme Court to review the case (it denied cert). I have no beef with Liptak's choice to go to Somin and Epstein. They are both very smart, well-regarded scholars with obvious expertise in this area. But their ideological commitments are also well known. I think Liptak was right to use them as sources, particularly because of their extensive familiarity with the case. But, on a charged topic like this one, which has become a major talking point for conservative opponents of Sotomayor's confirmation (see this op-ed in the Washington Times, for example, which also relied extensively on quotes from Epstein and Somin), it would have been nice to see him to offer something to balance the Epstein/Somin take on this case, either his own independent analysis (which was sorely lacking in the piece) or quotes from other legal experts not so clearly identified with a particularly libertarian-conservative approach to private property rights.

While I think there are some significant problems with the trial court's opinion, and while I disagree with the Second Circuit's use of a summary order, the case does not seem to me to be such a clear slam dunk for the plaintiffs that it should cause Sotomayor any serious trouble. The Liptak story made a great deal of the demand for the $800,000 payment, and rightly so. But the fact may be less obviously damning than initially appears to be the case.

The demand for the payment was made, as I understand the facts, by the developer granted by Port Chester the exclusive power to carry out redevelopment within the designated redevelopment area. That area included the plaintiffs' parcel. Now, I take it that the redeveloper agreed to take on his role because he stood to make a tidy profit from redeveloping the land within the redevelpoment area pursuant to the comprehensive plan and empowered with the ability to assemble parcels through the use of eminent domain. But the redeveloper certainly looked at the economics of the entire plan, and the profit to be earned from the plan as a whole. That profit would not come from every parcel or every individual element of the overall plan, but on the accomplishment of the redevelopment plan as a whole.

In the redeveloper's negotiations with the plaintiffs, the plaintiffs indicated that they wanted to redevelop their parcel within the redevelopment area (as part of a project that would have included some land they owned outside the redevelopment area) themselves byputting in a CVS store, keeping the profits from that project for themselves as well. It appears to have been in the context of these negotiations that the redeveloper, who wanted to put a Walgreen's on the site, asked for the $800,000 payment in order to forgo condemnation and as his condition for allowing plaintiffs to, in effect, remove their parcel from the larger redevelopment area.

The plaintiff quoted in the story called this extortion. But it's not obvious to me that this is the best way to characterize the dynamics of the situation. If the redevelopment of the plaintiffs' parcel was one of the elements on which the redeveloper stood to make a substantial profit, foregoing his own monopoly right to redevelop that parcel (a right given to him by the city when it designated him the developer for the redevelopment project) would have altered (from his perspective) the economics of the larger project as a whole. In other words, if I'm reading the facts correctly (and I'm sure Ilya will correct me if I'm wrong), allowing another developer (the plaintiffs) to earn the profits from that parcel would have represented a significant opportunity cost to the redeveloper, and, as such, his demand for some compensation for walking away strikes me as less sinister.

In effect, then, what the plaintiffs seem to have been challenging in the case was not the redeveloper's demand for $800,000, but the inclusion of their parcel within the redevelopment area subject to the redeveloper's monopoly on redevelopment in the first place. That was the decision that gave the redeveloper a financial stake in what happened on their parcel. But that determination had been made several years earlier, and the plaintiffs had not challenged it. On the merits, I think it would have been a pretty weak claim. Under Berman, the inclusion of a particular parcel within a redevelopment area is subject to rational basis review only. And for various reasons it can be perfectly rational to include within a redevelopment plan parcels that might have been
developed on their own, even in the absence of the state's intervention. Maybe there are facts I'm not aware of that made the inclusion of plaintiffs' parcel improper in some way, but I didn't see any in my reading of the district court's two opinions or the New York Times story.

But that's sort of beside the point in this case. The trial court held that, because the plaintiffs did not challenge their inclusion within the redevelopment area within the applicable statute of limitations, their claim was time barred, and the Second Circuit affirmed on that ground. I'm inclined to agree. In the NY Times article, the plaintiffs argue that they could not possibly have brought their suit until the demand for payment was made, but that's not quite right. If the demand for payment is seen as a legitimate request for compensation for the redeveloper's opportunity costs resulting from what amounts to a demand by the plaintiffs for a post hoc redrawing of the redevelopment area's boundaries (depriving the redeveloper of his monopoly right to develop plaintiffs' parcel), then the plaintiffs' complaint is really, at the end of the day, about those boundaries, and not about the redeveloper's request for compensation for changing the economics of his involvement in the project after the fact.

Now, many people will find it unseemly that in Port Chester's project the power to condemn has, in effect, been delegated to a private developer who stands to profit from its exercise. But Kelo permits that. There's no hint in the facts that the redevelopment project in Port Chester was actually some sort corrupt private giveaway to the designated redeveloper. Plaintiffs contend that, even though the developer's actions were consistent with the redevelopment plan and even though they didn't overtly challenge that plan itself, the redeveloper's demand for payment means that his use of eminent domain with respect to their particular parcel was pretextual. But I think my analysis above shows why that is not necessarily so.

If Kelo permits the private benefit from the exercise of eminent domain, I'm not sure I see the problem
with the private beneficiary demanding compensation to forgo the condemnation
action that confers it when, as here, condemnation is justified under the plan and forgoing condemnation would not undermine the comprehensive plan (e.g., because the person paying off the redeveloper agrees to implement the plan). In other words, and somewhat ironically, the fact that the plaintiffs wanted to put in a CVS and the redeveloper wanted to put in a Walgreens undermines, not strengthens, the plaintiffs case, in my view, since it legitimates the redeveloper's willingness to bargain. From the standpoint of the plan's execution (and the public interest in the project), either proposal would have been (more or less) fine. In fact, forbidding such deals strikes me as unwise on policy grounds, since it reduces the flexibility available to both redevelopers and condemnees. If someone other than the redevloper thinks she can implement the plan more efficiently and still turn a profit, then she should be allowed to bargain with the redeveloper to buy his right to undertake the project. Similarly, if private implementation of the redevelopment plan passes constitutional muster, as it can under Kelo, then the private redeveloper should be permitted to "subcontract" out the actual implementation of the plan in exchange for a fee. The District Court was therefore right that the brute fact of the demand for payment should not give rise to a constitutional violation or even (without more) a presumption of impropriety.

This is not to say that there might not be situations in which the redeveloper, even one acting consistently with the redevelopment plan, acts in such a lawless way that his behavior gives rise to some cause of action, either under a Kelo pretext analysis or, more likely, under a due process analysis. And this is where I think the District Court's cursory analysis falls short. That's not to say that it reached the wrong result, but, as I think the Institute for Justice's amicus brief on appeal nicely explains, the District Court's logic on this point was potentially far-reaching and troubling. A thorough Second Circuit opinion would have been a nice corrective, but, at the end of the day, the bottom-line result the panel reached was probably the correct one. (And if overuse of the summary order were disqualifying for a Supreme Court nominee, no Court of Appeals judge could make it through confirmation.) At a minimum, however, the facts in this case, and their interaction with the applicable law, appear to be far more complex than the NY Times article suggests.

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Comments

Great post, and necessary because the public dialogue on Didden has been very one-sided thus far. Another way one might untangle the statute of limitations question is by looking at the different intentions of the state and the redeveloper. Even if the redeveloper was corrupt when he sought to have Didden's parcel condemned, that doesn't seem to change the fact that the _state's_ initial decision to make the entire area subject to eminent domain was animated by a legitimate (under Kelo, anyway) theory of public use. In other words, I don't think the bad motivations of the redeveloper can render the state's rationale pretextual.

I'm also interested to see if/when this iteration of "property rights" is raised in Sotomayor's confirmation hearings, it touches a nerve in the same way that Kelo did. I've always thought that much of the backlash in that case was attributable to the visceral objection to the state forcing homeowners like Wilhelmina Dery or Suzette Kelo out of their personal residences (and the quote from Alito's confirmation hearings in the NYT piece makes much the same point). The property rights movement typically elides distinctions like this (hence their solicitude for MercExchange in the eBay case) but I'm not sure that "property" will play as well in the public imagination if we're dealing with a commercial owner who wanted to build a CVS.

Posted by: Dave | Jun 16, 2009 7:55:12 PM

Ilya Somin says the opinion is “the worst federal court takings decision since Kelo." But, the 2CA was required to follow Kelo, so it is unlikely he would have liked it anyhow. Even if Sotomayor didn't like Kelo, she had to follow it. Likewise, Kelo involved -- as the article has Alito reference -- seizure of homes that their owners didn't want to give up. This case involved a lot which the owner already planned to use commercially. It simply is not as bad on an emotional level.

The analysis provided here suggests that the two critics cited by NYT exaggerate in making it such a horrible decision. It suggests the analysis was too thin, analysis could have been used to address possible problems. IOW, it is upset that the opinion didn't serve as a glorified advisory opinion to address problems that did not arise here. Shades of criticism of Ricci, arguably. You explain how the facts do not show a "corrupt private giveaway" ... but the court should have ignored that and provided a broad ruling to address a potential giveaway?

Let's also take the "demand for payment" that allegedly kicked in late enough for the statute of limitations. First off, they made many claims, this was just one of many in a long litigation. Also, the district court noted: "Threats to enforce a party's legal rights are not actionable. DiRose v. PK Mgmt. Corp., 691 F.2d 628, 633 (2d Cir. 1982). Thus, even if Defendants did request payment in exchange for relinquishing the legal right to request condemnation, Plaintiffs have no recourse." Also, "That Port Chester, G&S, and Wasser did meet with Plaintiffs and conveyed a proposal that Plaintiffs found unacceptable does not give Plaintiffs any substantive claims. Plaintiffs pursued their CVS site plan application and the CVS lease knowing that the Private Developers, under the LADA, might attempt to buy or condemn the disputed properties."

Somin and Epstein are strong property rights people. I'm not surprised they didn't like the case. But, it addressed the facts at hand. This is yet another case of some group selectively wanting courts to be "activist" for causes they prefer.